Look for the “contexture” – unquantifiable traits.
You don’t want to compete with AI on quantifiable data. Same as news, AI should be able to record and analyze data at amazing speed.
In order to know what’s unquantifiable, you need to be on the AI side first. AI would want to make more info quantifiable. If you are on the AI side, you will know what kind of traits is hard to quantify.
Don’t trade on news.
Human won’t be able to compete with AI on speed (of reading news) and breath – AI can consume a lot of news in a second.
What should human investors do?
Look for any discrepancies vs reality – a) some are just fake news, b) some are partially made up based on leads, c) some are true but not important, etc.
Technology company isn’t necessarily asset-light.
GE was also a leading “technology” company in its days.
A technology company has no boundary.
It’s a group of brightest minds that bind together and shine wherever they sees darkness.
The TAM expansion is what makes “technology” companies amazing investments.
Tesla is not asset light.
Tesla is a technology company that is expanding its TAM.
Engineers that can only make cars make a company a car company. But if these engineers can do all sorts of designs and create new stuff, they make a tech company.
BYD domestic volume in May shows no growth yoy, despite overseas growth of 137% yoy.
YTD (Jan-May), BYD domestic volume has grown 27.5% yoy, but in May it’s flattish yoy at below 300k.
The big promotion in May is probably a reason – dealers might had been waiting for the discount, so that May volume is low.
Current consensus is for BYD to sell ~5.4mn cars in 2025, with overseas contributing 0.8mn and domestic sales reaches 4.6m (to grow near 20% yoy).
China overall passenger car market can grow actually, with cheaper models, large population (4x US!), and shorter holding period for each car (due to battery).
In 2024, U.S. new vehicle sales reached approximately 15.9 million units.
16mn x 4 is 64 million cars per year for China vs. ~22.6 mn passenger cars sold in 2024 in China.
The infrastructure is unlikely to support a sudden increase, but if it increases to 30mn pear year, 70% NEV -> 21mn, 30-33% m/s for BYD -> ~6-7mn is probably the ceiling of domestic volume for BYD.
Recently read the interesting discussion on endowment taxes from Matt Levine.
If endowments’ tax rate were to increase, they need to pay more on their investment income.
However, they might as well just include more payroll in its expenses, so that income before tax is significantly less.
Sounds very smart…
What’s the catch?
I guess –
if the entity needs to grow, it usually involves “net profit”. Thus it may grow slower, as more taxes will need to be paid each year for positive profits, unless net income is managed well to avoid near term taxes, or there is just no profit, which means it’s hard to grow (organically).
HKD is pegged to USD. The fixed range is 1 USD = 7.75 – 7.85 HKD.
However, a weird thing is happening recently.
HIBOR (Hong Kong Interbank Offered Rate) is dropping dramatically.
For a USD-pegged currency, its borrowing rate normally increases or decreases with USD, and is similar to USD, otherwise arbitrage may happen.
Fed’s fund rate currently is 4.25% to 4.50%.
HIBOR 1-month dropped from 4% to below 1%. from May to Jun.
May 2nd, 1 Month HIBOR is 3.98363% vs. Jun 19th, it’s 0.53506%
A 350 bps drop in 1.5 month! Crazy world.
Three things may happen:
1/ Fed to decrease interest rate.
That will probably happen within the next 12month, but not in the July meeting.
Possible in Sep and/or Dec meeting.
2/ HK to limit money outflow.
It will become more like mainland.
But why?
HK doesn’t have the incentive to do this. And Beijing also wants a special international finance center.
Thus, unlikely.
However, there might be more mainland’s RMB converting into HKD – think about SOEs.
Since they are under the direction of Chinese gov, they won’t participate in every corner of the global capital market.
These HKD will behave like under the capital control.
3/ HKD-USD peg breaks
Too big a thing.
In short-term, seems unlikely.
In early May, HKMA needs to sell HKD and buy USD.
In early May, the exchange rate hit the strong-side CU of HK$7.75 to US$1 four times on three trading days, during both Hong Kong and non-Hong Kong trading hours. The HKMA sold HK$129.4 billion in exchange for US$16.7 billion in accordance with the LERS mechanism.
After Fed’s rate decision in June, HKMA expects carry trades may drive USD stronger against HKD and makes HIBOR higher.
If carry trades are to persist, the Hong Kong dollar exchange rate may weaken further, and may even trigger the weak-side Convertibility Undertaking. In such a case, the HKMA would then sell US dollars in exchange for Hong Kong dollars in accordance with the LERS, leading to a corresponding decline in the Aggregate Balance, hence driving Hong Kong dollar interbank rates to gradually increase.
1/ Trump has a family business to grow.
The world can’t go too chaotic.
(Rich) people can’t hate the Trump brand.
2/ Trump wins by tough negotiations.
This I am not sure. But if two sides are not talking, how could negotiation happen?
If negotiation is not happening… that’s where Trump does the best.
However, if people all believes it’s only negotiation… then it becomes tougher for Trump to gain in negotiation.
That’s why I am not sure.
I have worked in both industries, venture capital and hedge fund.
I found that sometimes they can be exactly the opposite in how to make money.
While in venture capital, the deals that are more successful are those that are consensus. Capital pile in, and those with capital runs faster, adding to the moat.
While in hedge fund, the stocks that work better are those that are considered un-investable. When other holders cut loss / exit, it creates better risk reward profile and the perfect buying opportunity.
First of all, how large is the gap?
China’s household consumption is 39% of GDP, which is lower than EU average of 52%, 70% in the US, and below world’s average.
That’s about $2.3 trillion (13% x $17.8 trillion 2023 GDP).
Secondly, where are the areas to increase?
If look at GDP composition, China needs to increase in real estate services, healthcare, education, professional & technical services, information & communication, recreation & art, etc.
For real estate services, rent & management fees need to increase…
Healthcare and education is partially public spending. So need more gov budget allocation.
Services is essentially a problem of oversupply right now. Either needs to export or needs to increase demand.
Information & communication.. need to raise software prices.
Recreation & art needs more leisure time.
If you hear a piece of “news” from China’s mainstream media, that’s not the news anymore. Normally, this “news” can be seen from multiple official outlets in China in similar or even the same words.
Therefore, you can trade on the news anyway; you should assume market has already priced this information.
The reason is that nowadays information transmits super efficiently in China, so little people would be left behind without the exposure to those mainstream “news”. Thus, there is no one you can have information edge over, especially in the market.
Then where/how to get information edge?
1/ by double checking the news with resourceful people. Context will matter a lot and they can help you understand for example whether a change is big / serious or superficial / repetitive.
2/ read the full documents; gather any information that is shortened or simplified in the news
3/ focus on news that is not repeated in other mainstream medias
4/ compare with previously similar events – look for anything that is more or less than before; in other words, result is not important, the difference matters.
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